Spangler v. Spangler
| Decision Date | 31 March 2020 |
| Docket Number | Case No. 3:16-cv-1105 |
| Citation | 451 F.Supp.3d 813 |
| Parties | Ronald G. SPANGLER, et al., Plaintiff v. Jim F. SPANGLER, et al., Defendants |
| Court | U.S. District Court — Northern District of Ohio |
Stephen C. Bappert, Hillsdale, MI, for Plaintiff.
James L. Rogers, Jeffrey M. Stopar, Semro Henry & Spinazze, Toledo, OH, for Defendants.
Before me is the motion for summary judgment filed by Defendants Rapid Machine Inc., Jerelyn S. Spangler, and Jim F. Spangler. (Doc. No. 38). Plaintiff Ronda Tulloch, personal representative of the estate of deceased Ronald G. Spangler, filed a memorandum in opposition to Defendants’ motion. (Doc. No. 42). Defendants filed a reply. (Doc. No. 52).
In 1978, Ron and Jim Spangler started a tool and die business together in Camden, Michigan. In 1984, they incorporated this business in Ohio as Spangler Superior Tool Mfg., Inc.1 Jim owned 51% of Spangler's real estate and shares, and Ron owned the remaining 49%.
Although Jim observed that Ron had become an alcoholic by the late eighties, "Ron was shoulder to shoulder with [Jim] on every move [they] made" in Spangler until 1991 or 1992. (Doc. No. 39-1 at 4-5). After that time, Ron progressively declined and began showing up to work smelling of alcohol. (Id. ). Then, in 2001, Ron was diagnosed with prostate cancer
. (Id. at 5). After taking a leave of absence due to his illness, Ron came back to work "worthless" and "hooked on Vicodin." (Id. at 5, 14). Ron failed to show up for work every day he was supposed to and, when he did, Ron "reek[ed]" of alcohol. (Id. at 5). Because of this, Jim eventually fired Ron in 2006. (Id. ). Jim offered to buy Ron out of his interest in Spangler at the time, but Ron refused. (Id. ).
The relationship between the two brothers tracked the "downhill slope" of Ron's decline. (Id. ). Jim resented the fact that Ron was not contributing to their jointly-owned business. Therefore, in 2003, Jim incorporated his own business, Bridgewater Machine, because he "wasn't going to build a business up that benefitted [Ron] when [Ron] was not putting anything into it." (Doc. No. 39-1 at 12, 14). Bridgewater was the "same kind of business" as Spangler and operated out of the same shop. (Id. at 14). "[T]he only work Bridgewater [did] was work [Jim] sublet from Spangler's to Bridgewater." (Id. at 15).
Beyond directing Spangler work to Bridgewater, Jim also arranged for Spangler to lease Bridgewater-owned equipment. (Id. at 14-15, 30). Although Spangler initially leased the equipment at a fifty-percent discount, when Spangler became "more capable of making the full payment" in 2012, Spangler began making the full payments. (Id. at 30). At that time, Spangler also issued a payment of $25,000 "to partially make up for the back rent on equipment." (Id. ).
With Spangler becoming more and more profitable under his direction, Jim was unhappy that Ron was profiting from his hard work and sought ownership of the entire company. First, after learning of Ron's divorce, Jim tried to buy Ron's ex-wife out of her 24.5% share of Spangler she received during the divorce. (Id. at 5). Although she initially resisted, demanding a higher price than Jim was offering, Jim eventually purchased her interest in 2013. (Id. at 5-6). Specifically, Jim made a one-time payment of $82,000 – $41,000 for the real estate and $41,000 for the shares. (Id. at 6).
Jim offered the same deal to Ron at least twelve times, but Ron refused. (Id. at 8, 31). This angered Jim because Ron was continuing to collect a rent charge of $600 per month, even though he was not contributing to the business. Jim's feelings are memorialized in the May 2, 2014 Spangler Board Meeting Minutes, stating:
(Id. at 33).
At this time, in 2014, Ron was nearly a year in to his battle with throat cancer
that would eventually take his life. Because of his illness and a prior injury, Ron experienced chronic pain. To ease this pain, Ron's daughter, Plaintiff Ronda Tulloch, testified that Ron applied a 100mg Fentanyl patch every 72 hours, took Percocet, Vicodin, and Excedrin, and also used a morphine mouthwash. (Doc. No. 42-1 at 2). Other than prescribed medications, Ron also self-medicated with approximately half a gallon of whiskey every two to three days and a case of beer every five days. Between this cocktail, his illness, and possible senility, Ron needed help to perform daily activities, even though he was living alone. Ronda recalled that Ron would forget to pay bills, pay bills twice, and order things over the phone, forgetting he had done so by the time they arrived.
Despite Ron's deteriorating condition, Jim claims he did not know of Ron's illness at the time Ron allegedly agreed to a buyout and they negotiated the terms of this buyout over the course of three to four weeks. In fact, Jim testified that Ron seemed to be especially cleaned up and "stone sober" on the day of contracting, June 11, 2015. (Doc. No. 39-1 at 12). Jim's wife, Defendant Jerelyn Spangler, also claimed Ron looked "exceptionally good" and sober. (Doc. No. 39-2 at 19).
On this day, Jim picked up Ron from his house in Michigan and took him to the Spangler shop to sign the closing documents. (Doc. No. 39-1 at 12). Rather than using an attorney to draw up these documents, Jerelyn drafted them herself, using as reference the documents an attorney had drafted for the sale of Carol's interest. (Doc. No. 39-2 at 14).
Under the terms of the Agreement, Ron would sell Jim his interest in Spangler's real estate and shares for a "purchase price" of $79,950. (Doc. No. 39-1 at 36). Specifically, Ron would forfeit his ownership rights on the day of contracting for the down payment price of $9,950 – $7,500 for his real estate interest and $2,450 for his shares at a rate of $100 per share. (Id. at 36, 38). Pursuant to the Promissory Note, independently drafted by Jerelyn as no similar payment system was used in Carol's sale, the remaining $70,000 would be paid to Ron in $1,000 monthly installments. (Id. at 39). The Promissory Note also stated the $70,000 balance would be considered paid in full at the time of Ron's death and no further unpaid balance would be paid to Ron's estate. (Id. ).
Ron did not consult with his children or an attorney before signing theses documents. Because Ronda lived in Florida, she did not learn of the sale until she returned to Michigan in the fall of 2015 while helping her father with his bills. At this time, she discovered the $9,950 down payment Jim had paid to Ron as well as the closing documents. When she questioned Ron about this, Ron said he had hidden the documents at Jim's request and advised that his understanding of the transaction was that "he was merely authorizing an increase in rent that he would receive each month from $600 to $1,000" because of the profitability of the company. (Doc. No. 42-1 at 3). After Ronda's explained the true nature of the transaction, Ron became angry.
Meanwhile, Jim was in the process of merging Spangler and Bridgewater into a new company – Defendant Rapid Machine Inc. – owned by himself and Jerelyn. This merger was announced less than a week after Jim bought Ron out of Spangler. (Doc. No. 39-1 at 41).
Although Ron filed suit contesting the legality of the buyout agreement in May 2016, Ron succumbed to his illness on August 28, 2016. Because payments on the Promissory Note ended at the time of Ron's death and were paid on the first of the month, Jim paid only $22,950 for Ron's interest in Spangler. At the time of contracting, Ron's 24.5% interest in Spangler was worth at least $275,538.76 because: (1) Spangler's real estate was appraised for $360,000 prior to improvements made in 2012 and 2014; and (2) Spangler's shareholder's equity was $764,648 in 2014 and $1,044,811 in 2015. (Doc. No. 39-1 at 9). Because Ron would have been paid $7,800 in rent charges for the same period absent the buyout agreement, Ron profited only $15,150 from selling his interest in a company, which he refused to sell for years.
Summary judgment is appropriate if the movant demonstrates there is no genuine dispute of material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). All evidence must be viewed in the light most favorable to the nonmovant, White v. Baxter Healthcare Corp. , 533 F.3d 381, 390 (6th Cir. 2008), and all reasonable inferences are drawn in the nonmovant's favor. Rose v. State Farm Fire & Cas. Co. , 766 F.3d 532, 535 (6th Cir. 2014). A factual dispute is genuine if a reasonable jury could resolve the dispute and return a verdict in the nonmovant's favor. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A disputed fact is material only if its resolution might affect the outcome of the case under the governing substantive law. Rogers v. O'Donnell , 737 F.3d 1026, 1030 (6th Cir. 2013). Ohio substantive law governs here.
In the Amended Complaint, Ronda asserts the following eight causes of action: (1) incapacity to contract; (2) unconscionable contract; (3) silent fraud; (4) civil conspiracy; (5) usurpation of corporate opportunity; (6) breach of duty of loyalty and good faith; (7) voidable contract – patent ambiguity; and (8) fraud in inducement....
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...presents a further problem for 17 Defendants. Ohio courts typically construe ambiguity against the drafter. Spangler v. Spangler, 451 F.Supp.3d 813, 828-29 (N.D. Ohio 2020) (“[T]o the extent we encounter an ambiguity in the contract, that ambiguity must be construed against the drafting par......